Equities Research: Preparing for the Pullback
Lets use a measuring tool so we are all talking about the same thing. So, lets use the Dow Jones ETF (DIA) trading at 200.00, which let us know that nearly everyone has been calling for a top – and this is easy to do because you can start calling for a top for 90 days and still be right. Just simply predicting turns in markets is not enough. You need to say how, where and why. You need to have a common indicator, and ours is the chart below. Dow Jones ETF (DIA).
Note: the market has moved 12% higher since the Election in many indexes. Our proprietary research says it is about to give this back and more. So, the how and the where is shorting this index (DIA at 200)….
Our Technical Research Model shows the key area to watch is 187 which breaks the short up-trend and then we see a full 10% retest of 180. This support area will be critical, how this support area holds, and the event which drives it, will be the first real test of the Team Trump, it will also determine the direction for global markets for most of 2017.
The market will look at how the administration operates the levers they have at their disposal, and the nurture their own ability to stem a string of (market) losses. It is akin to having a stopper in your pitching rotation (baseball) that can halt market slides. This is an important piece of any administration – Team Trump will need the ability to calm markets.
They will also need to figure out how to create this, and Trump himself seems ready to take on this task…but markets are the only true voice for culture as it seemingly sees the world 6 months to a year in advance. It has historically been the ultimate predictor. Know also they have some very savvy Wall Street guys from Goldman Sachs who cannot wait to operate the worlds largest hedge fund…the US Economy.
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